





UC-NRLF 


SB    E3b    flA2 


:ALLA( 

FRO'M  GREA1 


By  HARRY  HUBBAR 


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THE  FALLACY  OF  DANGER 
FROM  GREAT  WEALTH 


BY 
HARRY    HUBBARD 


BOSTON 

PRESS  OF  GEO.  H.  ELLIS  CO. 

1918 


jjZ-l 


*»$ 


Copyright,  1913 

BY 

HARRY  HUBBARD 


THE    FALLACY    OF    DANGER    FROM 
GREAT  WEALTH. 


In  civilized  countries  men  save — that  is, 
set  aside  out  of  their  income — wealth  not 
to  be  spent  for  their  own  personal  needs  or 
pleasures  but  devoted  to  producing  other 
and  additional  wealth.  Thus,  for  example, 
a  farmer  out  of  his  crops  saves  a  portion  for 
next  year's  farm  operations,  a  manufacturer 
saves  enough  to  build  a  factory  and  operate 
it,  and  several  men,  united  as  a  corporation, 
save  enough  to  build  and  operate  a  railroad. 
One  of  the  chief  things  that  distinguishes  civi- 
lization as  we  have  it,  with  all  its  modern 
comforts  and  happiness,  from  savagery,  with 
its  want  and  misery,  is  the  capacity  to  save 
and  invest.  We  are  benefited  by  the  accu- 
mulated savings  and  investments  of  preced- 
ing years,  yet  most  wealth  (except  land, 
minerals  and  other  natural  objects)  would 
perish  very  soon  if  it  were  not  continually 
replaced.  For  example,  our  railroads  in  the 
United  States  have  been  practically  all  made 


269041 


4  THE  FALLACY  OF  DANGER 

over — road-beds,  rails,  bridges,  stations,  loco- 
motives and  cars — within  a  generation.  It 
is  so  in  nearly  all  other  industries. 

In  our  complex  modern  life,  saving  and 
investing  take  place  in  many  ways.  For 
example,  money  saved  and  deposited  in  a 
savings-bank  finds  its  way  out  in  a  loan  on 
mortgage  to  help  build  a  house,  a  factory,  or 
a  store;  or  it  pays  for  bonds,  and  the  proceeds 
are  put  into  a  railroad  or  some  public  work, 
as  a  school-house,  dock,  street,  etc.  In  any 
and  all  these  cases  the  money  deposited  in 
the  savings-bank  goes  ultimately  to  employ 
labor  and  pay  wages.  So  money  deposited 
in  any  other  bank  or  trust  company  is  loaned 
out  to  merchants,  manufacturers,  and  others, 
and  similarly  goes  to  pay  wages. 

The  same  is  true  of  money  saved  and  in- 
vested in  regular  course  of  business  in  stocks 
or  bonds.  Corporations  engaged  in  great 
business,  as  railroads,  issue  and  sell  their  stock 
and  bonds  in  order  to  obtain  money  to  carry 
on  their  work.  All  this  money  goes  to  employ 
labor  and  pay  wages,  or,  if  materials  are  bought, 
the  money  goes  to  pay  for  them  and  the 
labor  engaged  in  producing  them — in  the 
end  substantially  all  to  labor. 


FROM  GREAT  WEALTH  5 

So  it  is  not  possible  to  conceive  of  money 
saved  and  invested  in  regular  course  not 
going,  substantially  all  of  it,  to  the  employ- 
ment of  labor  and  the  payment  of  wages. 

No  rich  man  in  our  day  hoards  his  money. 
All  his  income  (except  what  he  spends  for 
personal  needs  and  pleasures  and  what  he 
gives  to  others  for  similar  purposes)  goes  into 
investments  in  some  form,  and  ultimately  all 
goes  to  employ  labor  and  pay  wages. 

It  is  one  of  the  natural  economic  laws,  / 
as  beneficent  and  as  immutable  as  the  law 
of  gravitation,  that  rich  men  who  invest  their 
money  in  order  to  grow  richer  are  really  trus- 
tees of  their  wealth  for  the  benefit  of  labor, 
whether  they  so  regard  themselves  or  not.  Tl^e 
only  way  a  rich  man  (or  any  man  for  th&t 
matter)  can  repudiate  such  trusteeship  is  by 
wasting  his  wealth  by  using  it  in  riotous  living 
for  himself  or  for  others.  He  cannot  possibly 
avoid  such  trusteeship  for  the  benefit  of  labor, 
so  long  as  he  saves  his  money  and  invests  it. 
He  has  the  legal  title,  but  the  money  must  be 
paid  out  for  labor.  The  danger  to  society  is 
not  when  the  rich  man  desires  to  save  and  in- 
vest his  money  and  become  richer,  but  when 
'  he  ceases  to  have  such  desire,  and  begins  to 


6  THE  FALLACY  OF  DANGER 

use  his  money  for  foolish  personal  pleasures 
for  himself  or  for  others.  The  probability 
that  a  man  who  has  spent  his  life  in  building 
up  a  fortune  will  turn  about  and  do  such  a 
thing  is  very  remote. 

This  economic  law  does  not  depend  for 
its  action  on  the  moral  character  of  the  cap- 
italist or  good-will  towards  workmen.  The 
meanest -spirited  accumulator  of  wealth  (if 
such  a  man  could  conceive  great  enterprises 
and  carry  them  through),  equally  with  the 
most  benevolent,  is  subject  to  the  law.  It  is 
a  safe  and  sufficient  protection  against  the 
imagined  dangers  of  the  accumulation  of 
great  wealth.  Men  clamor  "danger,"  "dan- 
ger," yet  these  dangers,  so  much  paraded  as 
the  capital  stock  of  agitators  and  feared  even 
by  some  good  people,  have  never  been  realized 
and  never  will  be,  for  this  beneficent  law  pre- 
vents any  such  thing.  The  poorest  may  look 
with  equanimity,  or,  rather,  with  gladness, 
because  of  his  own  personal  and  selfish  in- 
terest, upon  the  increase  of  the  wealth  of  the 
richest.  No  rich  man  growing  richer  need 
feel  that  he  is  taking  from  others,  but  rather 
he  should  rejoice  that,  as  he  grows  richer, 
he  is  necessarily  enriching  others. 


FROM  GREAT  WEALTH  7 

The  possessor  of  wealth  (rich  or  poor)  has 
the  legal  title  to  it;  and  he  gets  his  living — 
that  is,  his  food,  clothing,  and  shelter — and 
such  other  necessaries  or  luxuries  as  he  can 
use.  He  gets  nothing  more.  And  all  these  he 
leaves  in  a  few  short  years  after  he  has  ac- 
quired them.  He  spends  hard  days  and  sleep- 
less nights,  perhaps.  Many  a  poor  man  has 
what  are  to  him  far  more  pleasures  and  better 
health.  Every  man  to  his  taste.  What  is 
happiness?  Is  wealth?  Do  the  socialists 
really  think  so?  If  they  do,  then  why  not 
struggle  for  it  like  brave  men  instead  of 
whining  like  cowards?  And,  if  they  do  not 
think  so,  why  do  they  find  fault  with  men  of 
different  tastes  who  do  struggle  and  obtain 
wealth?  The  socialists  seem  to  make  a  lot  of 
fuss  over  a  thing  which  they  think  nobody 
(themselves  included)  ought  to  wish  for. 

People  talk  about  the  "danger"  of  great 
wealth.  It  seems  to  be  always  "danger," 
"danger,"  but  no  specification  of  any  defi- 
nite thing.  The  danger  from  great  wealth  is 
purely  imaginary.  The  real  danger  is  that 
men  may  not  save  their  money  so  as  to  have 
great  wealth,  and  thus  have  a  great  fund  for 
investment   and    wages.      Natural    economic 


8  THE  FALLACY  OF  DANGER 

laws  govern  the  accumulation  and  distribu- 
tion of  wealth,  and  government  may  well 
hesitate  before  it  tries  to  go  contrary  to  these 
natural  laws. 

One  may  challenge  the  world  to  show  how 
there  could  be  any  system  under  which  more 
money  could  be  made  available  for  wages 
than  under  the  existing  system  of  private 
property  and  the  saving  and  investing  of 
money.  All  there  is  now  goes  as  wages. 
How  could  more  go?  Only  by  saving  and 
investing  more.  It  deserves  consideration 
whether  there  ought  not  to  be  an  effort  to 
save  more.  The  expenses  of  all  classes, 
rich  and  poor,  have  mounted  upward  con- 
tinually. What  were  formerly  luxuries  are 
now  deemed  necessaries.  Reliance  upon  pen- 
sions by  private  corporations  or  by  the  gov- 
ernment have  taken  the  place  somewhat  of 
saving  up  for  old  age.  There  is  a  spirit  of 
spending  now  and  letting  the  future  care  for 
itself.  Such  a  spirit  ought,  in  the  interests 
of  workmen  and  of  society,  to  be  checked. 
So,  too,  for  precisely  the  same  reasons  ought 
to  be  checked  anything  that  will  discourage 
men  from  saving  and  investing  and  build- 
ing  up   big   fortunes.     We    have   seen   that, 


FROM  GREAT  WEALTH  9 

when  these  are  built  up,  they  belong  by  an 
inexorable  law  to  the  workmen,  though  the 
legal  title  be  in  the  owner.  To  decrease  them 
is  to  decrease  the  fund  for  wages. 

For  the  good  of  workmen  no  one  ought  to 
wish  that  a  great  captain  of  industry  retire 
from  business  or  have  his  fortune  diminished. 
Workmen  are  interested  to  have  him  stay 
in  the  harness  as  long  as  possible  and  have 
a  big  fortune  to  invest  and  pay  out  in 
wages.  Work  is  good  for  men.  So  is  mak- 
ing wealth.  To  give  permanent  work  and 
good  wages  is  one  of  the  finest  achieve- 
ments of  our  modern  industrial  system. 
To  honor  those  who  do  this  is  wise  for 
workmen  and  society.  In  our  own  coun- 
try such  men  have  been  honored  except  by 
the  demagogue  and  his  followers.  In  Eng- 
land they  have  received  titles.  May  the 
day  be  long  distant  when  public  opinion 
and  public  policy  or  any  act  of  the  govern- 
ment shall  discourage  the  saving  and  invest- 
ing of  money  by  either  rich  or  poor!  May 
the  day  also  be  far  distant  when  we  have  in 
this  country  (as  a  result  of  any  such  discour- 
agement of  industry)  a  rich,  do-nothing,  and 
money-spending  class,  instead  of  a  saving  and 


10  THE  FALLACY  OF  DANGER 

investing  class  engaged  in  magnificent  and 
beneficent  industries! 

Society,  and  especially  workmen,  ought  to 
be  glad  that  some  men  take  pleasure  in 
saving  and  investing  money  and  in  growing 
rich;  that  they  enjoy  it,  and  therefore  do  it. 
Society  ought  to  be  glad  that  there  are  great 
captains  of  industry,  men  who  can  conceive 
great  things  and  carry  them  to  success.  The 
world  needs  them.  There  are  at  least  a  thou- 
sand followers  to  one  leader  in  the  industrial 
world.  The  leaders  are  necessary,  if  big  in- 
dustries, big  production,  and  consequent  big 
wages  are  to  be  had.  They  are  as  necessary 
in  the  industrial  world  as  a  wise  father  or 
mother  is  in  a  successful  household. 

"Except  a  corn  of  wheat  fall  into  the 
ground  and  die,  it  abideth  alone;  but,  if  it 
die,  it  bringeth  forth  much  fruit."  This  is 
as  true  to-day  as  when  spoken.  It  not  only 
applies  to  wheat,  but  it  is  a  great  truth 
as  to  modern  saving  and  investing.  The 
only  method  of  increasing  wealth  is  by  sav- 
ing and  investing  it,  and  this  means  that  it 
must  be  paid  out  in  wages  and  consumed,  and 
in  its  place  a  new  and  increased  amount  of 
wealth  is  produced,  and  this  process  goes  on 


FROM  GREAT  WEALTH  11 

indefinitely.  A  talent  of  money  buried  in 
the  earth  or  hidden  in  a  napkin  never  pro- 
duced ten  other  talents  or  even  one. 

Saving  means  sacrifice  of  a  present  for  a 
future  gain, — always  has  and  always  will. 
The  savage  is  not  always  willing  to  make  it; 
but  civilized  man  knows  how,  and  ought  to 
make  it.  Envy  of  those  who  have  made  this 
sacrifice  and  succeeded  in  accumulating 
wealth  is  not  becoming  to  a  brave  man. 

If  wealth  is  dangerous,  how  much  is  dan- 
gerous? Is  a  million  dollars?  May  not  a 
million  dollars  be  wasted  as  readily  as  a  hun- 
dred millions?  How  many  cases  have  oc- 
curred in  our  day  of  great  wealth  misused? 
We  already  have  some  laws  against  the  mis- 
use of  wealth, — our  guardianship  laws.  More 
laws  could  be  enacted  along  that  line  if  nec- 
essary, and  thus  fully  protect  every  one  with- 
out diminishing  the  motive  to  save  and  invest, 
which  is  so  necessary  for  the  welfare  of  society. 

One  would  think,  to  read  some  things  that 
have  been  written  or  said  about  the  wealth  of 
the  rich,  that  they  had  their  wealth  in  money 
on  deposit  in  banks  or  perhaps  locked  up  in 
their  own  safes;  and  that  they  were  constantly 
adding  to  their  "pile"  thus  locked  up;  and 


12  THE  FALLACY  OF  DANGER 

that  there  was  danger  that  they  would  thus 
lock  up  all  the  wealth  of  the  world,  and  what 
would  the  poor  do  then?  Most  of  the  fear 
of  great  wealth  has  as  senseless  a  foundation 
as  that.  The  truth  is  that  the  wealth  of  the 
rich  has  been  paid  out,  invested  in  business 
where  it  is  fixed,  and  could  not  be  taken  back 
by  the  owner.  He  could  sell  it  and  transfer 
it  to  some  one  else,  yes.  But  how  could  the 
wealth  put  into  railroads  or  factories  or  ma- 
chines be  taken  back  by  the  man  who  has 
invested  his  money  in  them?  The  railroads, 
factories,  etc.,  must  continue  to  exist  and 
benefit  workmen  and  society  long  after  the 
men  who  have  created  them  have  passed  away. 
A  small  part  of  the  wealth  of  the  rich  is 
deposited  in  banks.  But  this  is  not  "idle," 
hoarded  money,  as  some  would  have  us  sup- 
pose. One  might  think,  to  read  or  hear  some 
statements,  that  the  "deposits"  in  a  bank 
are  money  on  hand  in  the  bank.  Far  from  it: 
the  "deposits"  are  what  the  bank  owes  to  its 
depositors.  It  is  a  pity  the  words  "due  to 
depositors"  were  not  always  used  instead  of 
"deposits,"  for  it  would  save  some  erroneous 
thinking.  The  bank  has  loaned  out  about 
75  per  cent,  of  the  "deposits"  of  its  depositors, 


FROM  GREAT  WEALTH  13 

and  retained  only  about  25  per  cent,  in  cash  as 
a  reserve  to  pay  its  deposits  on  demand. 
These  loans  are  made  to  merchants,  manu- 
facturers, and  other  business  men  to  carry 
on  the  business  of  the  world,  and  out  of  this 
are  paid  money  for  wages,  and  raw  materials 
(these  in  turn  being  nearly  all  wages).  No 
bank  takes  a  rich  man's  money  and  keeps  it 
as  a  hoard.  That  would  be  the  business  of 
a  safe  deposit  company,  if  any  one  was  fool- 
ish enough  in  these  days  to  hoard  his  money 
in  cash.  No  rich  man  does  this.  The  ten- 
talent  man  never  hides  his  money  in  a  napkin. 
It  is  only  a  one-talent  man  who  does  this. 

So,  then,  we  find  that,  as  a  matter  of  fact, 
when  the  rich  man  adds  to  his  "pile,"  he  is 
adding  to  his  investments  in  productive  en- 
terprises, no  matter  how  much  he  adds,  and 
that  all  of  his  wealth  goes  out  ultimately  in 
wages.  A  great  "danger"  to  the  country 
and  to  the  poor!  A  "great  peril"!  It  must 
be  "controlled,"  and  legislated  against,  etc., 
ad  infinitum,  and  ad  nauseam,  too. 

Even  if  money  was  given  away  freely  by 
the  wealthy,  this  would  not  increase  the  total 
receipts  of  the  whole  number  of  workmen;  for 
all  that  is  saved  and  invested  already  goes  as 


14  THE  FALLACY  OF  DANGER 

wages,  and  if,  instead  of  being  saved  and  in- 
vested and  thus  paid  out  as  wages,  part  of  the 
money  was  given  away,  the  workmen  would 
not  have  more.  If  the  gifts  were  not  to  the 
workmen,  they  would  have  less.  If  the  gifts 
were  made  and  consumed,  and  if  there  was  no 
production  by  means  of  the  gifts  to  replace  the 
consumption,  then  the  workmen  and  society 
would  be  worse  off  than  if  the  gifts  had  not  been 
made  and  the  money  had  been  left  invested  in 
industry,  paying  wages  and  producing  wealth. 

When  workmen  see  that  a  big  sum  is  to  be 
spent  in  anything  but  industry,  their  attitude, 
in  their  own  interest,  ought  to  be  one  of  in- 
quiry. Will  such  sum  be  spent  for  a  justifiable 
purpose?  If  the  sum  remains  in  industry,  it 
is  theirs,  the  workmen's,  though  the  legal  title 
be  in  the  investor.  If  the  sum  is  taken  out  for 
a  gift  to  a  charity,  the  inquiry  ought  to  be 
whether  it  is  justifiable?  If  the  government 
proposes  to  take  a  sum  in  taxes  (from  the 
rich  or  poor),  the  workmen  ought  to  inquire 
whether  it  is  justifiable?  If  not,  then  the  loss 
is  the  workmen's,  even  though  the  loss  of  the 
legal  title  falls  on  the  owner. 

It  is  a  wicked  waste  for  a  wealthy  man  (or 
any  man)  to  take  money  from  his  investments 


FROM  GREAT  WEALTH  15 

(existing  or  proposed)  and  put  it  into  an  un- 
wise charity. 

It  is  a  wicked  waste  for  a  government  to 
take  money  in  taxes  from  its  people  (rich  or 
poor)  that  would  be  saved  and  invested  if 
the  government  uses  such  money  for  any  but 
necessary  and  useful  purposes  and  in  the  most 
economical  manner.  Any  and  all  waste  by 
government  is  a  direct  injury  to  workmen, 
whether  the  taxes  wasted  come  from  rich  or 
poor. 

If  taxes  are  levied  on  the  rich,  it  is  to  be 
presumed  that  such  taxes  will  be  paid  out  of 
what  may  be  called  their  surplus  for  saving 
and  investment  rather  than  out  of  that  por- 
tion of  their  income  which  they  have  been 
accustomed  to  spend  for  personal  needs  and 
pleasures.  If  this  presumption  is  correct, 
taxes  levied  on  the  rich  diminish  their  fund  for 
saving  and  investment  and  thus  diminish 
wages.  Taxes  levied  merely  to  take  money 
from  the  rich  in  order  to  make  them  poorer 
(if  in  these  days  such  taxes  are  conceivable) 
would  thus  diminish  the  funds  which  go  for 
wages. 

Not  all  gifts  to  so-called  charity  or  benevo- 
lence are  for  the  benefit  of  society.     As  work 


16  THE  FALLACY  OF  DANGER 

and  wages  are  usually  better  than  alms,  so 
saving  and  investing  money  (though  it  results 
in  a  big  fortune  for  the  owner)  are  far  better 
for  society  than  foolish  giving.  The  person 
who  benefits  society  is  the  man  who  by  saving 
and  investing  accumulates  a  fortune,  and  not 
the  family  who  spend  and  give  away  the  fort- 
une after  his  death. 

From  what  is  stated  above  it  follows  that 
whatever  increases  the  product  of  industry 
increases  wages.  The  increase  of  product, 
if  it  goes  in  the  first  instance  to  the  capi- 
talist, increases  his  income,  and  out  of  his  in- 
come he  has  more  money  for  saving,  and  all 
his  saving,  as  above  explained,  goes  ultimately 
as  wages.  Thus  all  labor-saving  machinery 
and  devices  are  for  the  benefit  of  laborers,  and 
so  also  all  efficiency  of  labor  in  every  form. 
The  industrial  development  of  the  United 
States  in  the  last  twenty  years,  or  even  the 
last  ten  years,  is  an  instance  and  an  irrefut- 
able proof  of  this  truth. 

The  grand  successes  of  our  own  times,  and 
especially  of  our  own  country,  have  been  in- 
dustrial. Through  these  successes  the  great 
body  of  the  people  of  the  country  have  been 
raised    to    a    level    of   prosperity    with    high 


FROM  GREAT  WEALTH  17 

wages  and  comfortable  living  never  before 
existing  in  the  world. 

In  earlier  times  in  Europe  the  leaders  of  the 
people  (under  the  various  names  indicating 
leadership  or  ability,  as  duke,  king,  etc.) 
built  their  walled  towns  and  castles,  and 
provided  armor  and  fighting  materials,  and 
they  and  their  followers  spent  much  time  in 
petty  wars.  Industry  was  carried  on  in  the 
crudest  and  most  wasteful  manner  as  compared 
with  industry  in  our  country  to-day.  Pov- 
erty and  ignorance  and  lives  more  animal  than 
human  were  the  rule  among  ordinary  people. 
Even  palaces  of  kings  of  a  few  hundred  years 
ago  were  far  less  comfortable  than  the  homes 
of  workingmen  in  our  country  to-day. 

Our  monuments  are  industrial.  In  the  cen- 
turies past  the  people  in  Europe  put  vast 
labor  and  money  into  the  erection  of  cathe- 
drals and  other  buildings  for  religious  pur- 
poses. We  look  on  these  with  wonder.  But 
far  more  wonderful  and  more  useful  are  our 
railroads,  steamships,  telegraphs,  telephones, 
wireless  telegraph,  our  factories  of  a  thousand 
kinds  and  their  multitudes  of  machines  and 
tools,  the  power  loom  and  spinning  machine, 
the    cotton-gin     and    hosts    of    agricultural 


18  THE  FALLACY  OF  DANGER 

machinery  and  implements,  sewing  machines, 
knitting  machines,  automobiles,  and  countless 
other  labor-saving  devices.  All  these  were 
the  inventions  and  creations  of  men  within 
about  one  hundred  years,  working  under  the 
existing  conditions  of  private  ownership  and 
control  of  wealth  and  freedom  of  industry, 
where  great  captains  of  industry  received  their 
rewards,  and  men  who  built  up  industries  had 
the  joys  and  gains  and  honors  due  to  their 
success.  All  these  men,  however,  as  above 
stated,  were  really  trustees  for  the  benefit  of 
the  public,  whether  they  knew  it  or  willed  it 
or  not.  They  could  not  benefit  themselves 
without  benefiting  their  fellow-men  far  more. 
There  has  never  before  been  a  period  when 
wages  have  been  so  high  as  during  the  past 
ten  or  fifteen  years, — a  period  in  which  there 
has  been  the  greatest  corporation  develop- 
ment in  the  history  of  the  world. 

We  have  heard  much  in  recent  years  of  so- 
called  "reforms"  in  the  control  of  wealth, — 
as  if  somehow  society  at  large  is  to  be  bene- 
fited by  some  such  "reforms."  There  has 
been  much  talk  that  wealth  must  be  "con- 
trolled" in  some  way  by  the  government  or 
it  will  become  "dangerous."     Let  us  see  what 


FROM  GREAT  WEALTH  19 

benefit,  if  any,  is  to  be  derived  from  any  such 
control. 

The  way  to  have  money  or  wealth  to  use  in 
the  payment  of  wages  is  by  saving,  as  already 
above  explained.  The  government  itself  has 
no  means  of  saving;  for  it  earns  no  money 
(at  least  where  the  government  carries  on  no 
industry),  but  receives  taxes  taken  from  per- 
sons who  have  earned  money.  Will  individ- 
uals save  more  or  less  money  if  what  they 
save  is  to  be  "controlled,"  not  by  themselves, 
but  by  the  government?  Perhaps  it  is  not 
wise  to  say  that  all  men  are  naturally  lazy. 
But  we  may  safely  assume  that  most  men  like 
to  get  a  living  with  the  least  possible  effort. 
If,  then,  the  government  is  to  step  in  and 
"control"  what  a  man  saves  and  invests, 
is  he  going  to  earn  enough  to  save  anything? 
If  the  government  is  going  to  control  a  man's 
capital, — that  is,  all  that  a  man  can  save,  all 
that  he  earns  beyond  what  is  needed  for  his 
support, — is  he  going  to  earn  anything  beyond 
an  amount  sufficient  for  his  support?  Why 
should  he?  What  would  be  his  motive?  To 
the  extent  that  the  government  undertook  to 
"control"  wealth,  there  would  be  a  tendency 
to  decrease  future  saving. 


20  THE  FALLACY  OF  DANGER 

But  suppose  the  government  seized  existing 
wealth  (without  paying  compensation)  and 
took  "control"  of  that,  what  would  be  the 
effect  on  society?  Would  the  government 
manage  that  wealth  better  than  it  is  now 
managed?  The  government  is  made  up  of 
mortal  men  elected  to  office.  With  all  respect, 
one  may  ask  whether  they  have  individually, 
or  as  a  body,  proved  themselves  capable  of 
managing  big  financial  business.  Have  they 
gained  ten  pounds  where  they  started  with 
only  one,  or  are  they  five-pound  men,  or  not 
even  one-pound  men?  Election  to  office 
works  no  miracle  in  a  man.  Shall  the  "con- 
trol" of  wealth  be  taken  from  those  who  have 
earned  it,  and  conferred  upon  those  who  have 
not?  Shall  we  reverse  the  Bible  narrative, 
and  take  away  from  the  man  who  by  industry 
and  ability  has  gained  ten  pounds  and  confer 
the  "control"  of  those  ten  pounds  upon  the 
man  who  has  gained  only  five,  or  even  upon 
the  man  who  has  gained  none?  Shall  we  take 
wealth  from  those  who  have  proved  themselves 
capable  of  managing  it  and  confer  "control" 
upon  those  who  have  not?  Some  of  the  little 
one-talent  or  no-talent  men  seem  to  want  to 
take  "control"  of  wealth  away  from  the  big 


FROM  GREAT  WEALTH  21 

ten-talent  men.     It  would  not   be  good  for 
society. 

There  is  no  magic  by  which  government  is 
able  to  manage  things.  Officials  are  only 
individuals,  and  are  no  wiser  because  they 
are  elected  to  office;  and  they  are  not  usually 
elected  because  of  any  ability  they  have 
shown  in  managing  the  industries  of  the  coun- 
try. But,  if  they  were  to  be  elected  to  office 
because  of  such  ability  already  shown,  there 
is  no  reason  to  think  they  would  manage 
business  any  more  wisely  because  they  were 
officers  of  the  government  than  they  did  as 
individuals  or  as  officers  of  corporations. 
If  the  government  undertook  the  manage- 
ment of  industry,  then,  in  order  that  the  people 
might  not  suffer  loss  through  bad  manage- 
ment, government  would  be  compelled  to  have 
as  managers  the  same  men  that  now  manage 
business  successfully.  But  it  would  be  im- 
possible for  the  government  to  get  such  man- 
agers. The  men  who  have  been  the  great 
captains  of  industry  have  not  done  their 
work  for  a  salary,  but  because  they  were  build- 
ing up  a  great  business  which  was  their  own 
to  manage  and  control,  for  the  joy  as  well  as 
the  gain  which  was  in  the  work  and  the  sue- 


22  THE  FALLACY  OF  DANGER 

cess.  Any  one  who  thinks  that  government 
could  get  such  work  from  such  men  on  a  salary 
as  a  part  of  a  government  machine  can  have 
little  knowledge  of  human  nature. 

We  have  heard  a  cry  that  the  "interests" 
shall  not  be  represented  in  Congress  or  in 
any  legislative  body.  If  this  means  that  no 
man  who  has  wealth  is  to  be  elected  to  office, 
then  is  it  not  time  to  protest  against  any 
such  doctrine?  Is  it  not  wise  that  able  men 
shall  sit  in  Congress?  Shall  we  go  out  into 
the  streets  and  hunt  up  a  man  who  has  noth- 
ing, no  "interest"  in  anything,  and  elect  him? 
Shall  we  elect  men  who  have  never  had  the 
ability  (in  our  time  and  country  with  all  its 
opportunities)  to  acquire  any  "interest"  in 
anything?  Are  such  men  likely  to  make  wise 
legislators?  And  then,  if  it  is  proposed  to 
give  such  men  "control"  of  the  wealth  and 
industry  of  the  country,  are  great  and  good 
results  to  be  expected?  Will  such  men  be 
able  to  do  better  for  the  country  than  they 
have  been  able  to  do  for  themselves? 

The  assertion  that  government  "control" 
of  wealth  is  desirable  must  be  based  on  the 
idea  that  the  people  of  the  country  as  a  whole 
would  thus  get  more  good  out  of  the  wealth. 


FROM  GREAT  WEALTH  23 

Would  they?  We  have  seen  above  that  sub- 
stantially all  wealth  saved  and  invested  is  paid 
out  in  wages.  The  more  money  people  save 
and  invest,  the  greater  is  the  amount  paid  out 
in  wages.  This  does  not  depend  on  the  bene- 
volent disposition  of  the  employer,  but  upon 
natural  economic  laws.  Would  this  fund  be 
increased  if  there  was  government  "control"? 
Most  certainly  the  contrary,  for  saving  would 
be  decreased  if  a  man  ceased  to  "control" 
what  he  saved.  A  direct  effect  of  govern- 
ment "control,"  therefore,  would  be  a  decrease 
of  wages. 

It  is  a  pertinent  question  how  far  our  govern- 
ment can  go  in  its  "control"  of  railroads  and 
other  corporate  industries  without  having  as 
a  direct  result  a  decrease  of  the  amount  of 
saving  and  investment  in  railroads  and  such 
other  industries  and  a  consequent  decrease 
in  the  amount  paid  out  as  wages.  Indeed, 
it  deserves  consideration  whether  already  as 
a  result  of  government  "control"  there  have 
not  been  much  smaller  investments  in  new 
railroads  and  as  a  direct  result  a  much  smaller 
sum  available  for  wages  in  railroad  building 
and  operation.  It  is  reported  that  in  the  year 
1912  there  were  fewer  miles  of  new  railroads 


24  THE  FALLACY  OF  DANGER 

built  in  the  United  States  that  in  any  of  the 
fifteen  preceding  years.  Much  money,  driven 
away  from  railroad  investments  by  govern- 
ment control,  has  found  its  way  into  indus- 
trials. If,  now,  the  government  is  going  to 
" control"  industrials  also,  what  will  be  the 
result  as  to  investments  of  savings  in  indus- 
trials? Will  they  continue?  If  not,  there 
will  be  a  smaller  amount  to  pay  out  in  wages. 
Add  to  the  above  loss  the  fact  that  a  very 
large  part  of  our  country  is  still  without  rail- 
roads, and  is  compelled  to  haul  its  products 
to  market  long  distances  over  execrable 
wagon  roads,  which  by  the  way  are  and  have 
been  under  the  absolute  ownership  and  control 
of  the  government,  and  constitute  a  striking 
example  of  government  "control."  What 
the  producer  and  consumer  have  to  pay  per 
mile  for  such  hauling  is  many  times  what  any 
railroad  ever  charged  its  patrons.  Competi- 
tion and  efficiency  under  freedom  of  manage- 
ment have  been  the  main  causes  of  the  reduc- 
tion of  railroad  rates  to  the  present  low  level. 
The  little  that  the  railroad  commissions  have 
saved  in  rates  to  some  shippers  where  rail- 
roads now  exist  may  be  nothing  compared 
with  the  total  loss  that  government  "control" 


FROM  GREAT  WEALTH  25 

has  brought  upon  the  wage-earners  and  pro- 
ducers and  consumers  of  the  entire  country, 
and  the  end  is  not  yet.  Moreover,  what  the 
railroad  commissions  "save"  the  shippers  is 
not  a  saving  in  any  proper  sense,  but  a  trans- 
fer from  one  person  to  another.  It  adds  no 
wealth  or  wages  to  the  community,  as  does  in- 
creased efficiency  of  labor  from  construction 
of  new  railroads  and  improvement  of  old  ones. 
Notwithstanding  the  government  control  of 
railroads,  interest  on  bonds  and  some  dividends 
on  stocks  are  still  paid  to  the  holders.  Any- 
thing short  of  this  would  be  confiscation.  But 
there  is  a  deeper  question  than  merely  getting 
interest  on  bonds  and  dividends  on  stock 
(which  dividends,  by  the  way,  are  now  rather 
uncertain,  not  guaranteed  by  the  government 
which  is  in  control,  and  in  most  instances 
not  above  interest  rates,  and  with  little  hope  of 
increase  in  the  future).  The  greatest  motive 
for  a  wealthy  man  to  start  a  big  business  is 
his  ability  to  create  and  control  it.  The 
business  is  his  creature,  his  pet,  his  hobby. 
If,  now,  control  is  to  be  taken  away  from  him 
and  vested  in  any  Tom,  Dick,  or  Harry  who 
may  by  appeal  to  the  dear  people  get  himself 
elected  to  office,  where  is  there  any  longer 


26  THE  FALLACY  OF  DANGER 

any  motive  for  a  man  of  big  genius  to  under- 
take to  create  big  things  in  railroads  or  other 
industries?  Of  course,  the  big  railroads  now 
existing  must  be  managed,  and  this  furnishes 
work  for  men  of  genius.  But  where  is  the 
motive  to  lead  a  big  man  to  do  in  the  future 
big  things  in  creating  new  railroads  and  other 
industries  such  as  have  been  created  in  the 
past?  Furthermore,  who  is  going  to  under- 
write any  big  new  railroad  when  the  condi- 
tions are  that,  if  any  money  is  to  be  made  out 
of  it  in  dividends,  there  is  a  government 
commission  ready  and  willing  to  reduce  rates 
until  dividends  do  not  exceed  an  interest  rate, 
and  with  no  guaranty  that  they  will  equal  an 
interest  rate?  When  both  control  and  profit 
are  no  longer  to  belong  to  a  great  business 
leader,  what  motive  has  he  to  engage  in  the 
work? 

There  are  ways  of  increasing  the  funds  for 
wages,  and  thus  increasing  the  prosperity  of 
the  wage -earners,  but  they  are  not  govern- 
ment control.  Whatever  increases  the  prod- 
uct of  labor  increases  the  fund  for  saving, 
and,  if  saving  takes  place,  increases  the  fund 
for  wages,  whether  it  be  labor-saving  machin- 
ery or  greater  efficiency  of  the  workman  from 


FROM  GREAT  WEALTH  27 

any  other  cause.  In  the  thirties  and  forties 
in  the  United  States  there  was  a  lament  that 
so  many  horses  and  stage-coaches  and  coun- 
try taverns  were  to  be  thrown  out  of  business 
by  the  incoming  railroads.  What  was  the 
result?  More  people  have  been  employed 
and  more  wages  paid  than  would  ever  have 
been  possible  if  railroads  had  not  come.  So 
all  kinds  of  machinery  and  labor-saving  devices 
in  the  United  States  have  made  our  labor  the 
most  efficient  in  the  world,  and  with  our  great 
natural  resources  and  good  climate  have  made 
the  product  immense  out  of  which  savings 
can  take  place.  If  the  product  goes  largely 
to  the  workman,  as  it  does,  and  is  shown  by 
the  immense  amounts  paid  out  in  wages  as 
compared  with  what  is  paid  in  dividends  or 
interest,  then  the  workman  gets  the  high 
wages  directly  in  that  way.  Look  over  the 
annual  report  of  any  great  railroad  company, 
and  see  what  amount  is  paid  out  directly  as 
wages.  Add  to  this  what  is  paid  out  for  ma- 
terials and  supplies,  which  in  turn  are  pro- 
duced by  labor  and  the  cost  of  which  also  rep- 
resents amounts  paid  out  in  wages.  Compare 
with  these  figures  the  small  amount  paid  out 
as  interest  and  dividends.     Consider,  too,  that 


28  THE  FALLACY  OF  DANGER 

out  of  interest  and  dividends  all  that  is  saved  by 
those  who  receive  interest  and  dividends  and 
invested  is  also  paid  out  in  wages,  and  it  will 
be  seen  how  the  wage-earners  are  interested 
to  have  big  enterprises  exist  and  have  great 
captains  of  industry  to  create  and  manage 
them  successfully.  Look  over  the  annual  re- 
ports of  all  great  industries,  and  the  same 
thing  is  true.  Dividend  and  interest  distri- 
butions are  published  in  the  newspapers.  If 
the  amounts  the  railroads  and  other  big  in- 
dustries pay  out  in  wages  and  in  materials 
(also  all  ultimately  wages)  were  published 
with  the  same  fulness,  the  public  would  get 
a  much  more  accurate  notion  of  how  wealth 
produced  by  a  big  railroad  or  other  industry 
is  divided.  The  rich  man  cannot  get  even 
this  small  payment  of  interest  and  dividends 
without  having  these  big  amounts  paid  out 
in  wages. 

But  not  all  recipients  of  dividends  and  in- 
terest are  rich  men.  A  late  report  is  to  the 
effect  that  the  Pennsylvania  Railroad  Com- 
pany alone  has  about  84,000  stockholders. 
The  United  States  Steel  Corporation  also  has 
enough  stockholders  to  constitute  a  small 
army.     The  number  of   stockholders   in   the 


FROM  GREAT  WEALTH  29 

numerous  corporations  of  the  country  runs 
up  into  the  millions,  so,  also,  the  number  of 
bondholders.  Among  the  bondholders  and 
stockholders  are  the  big  life  insurance  com- 
panies, savings-banks,  and  other  institutions 
that  represent  millions  of  small  investors,  as 
well  as  millions  of  small  holders  who  have 
themselves  invested  directly.  An  attack 
upon  big  corporations  is  really  an  attack 
upon  millions  of  men  and  women  of  small 
wealth  who  have  saved  and  invested  their 
money,  as  well  as  an  attack  upon  the  wages 
of  workmen. 

The  savings  by  workmen  in  our  country  are 
immense.  The  sums  in  savings-banks,  life 
insurance  policies,  homes  and  furnishings, 
and  the  amounts  saved  and  invested  in  various 
kinds  of  business  are  enormous.  Most  of  the 
workmen  in  our  country  have  recognized  the 
fact  that  saving  is  the  beginning  of  prosperity. 
No  matter  how  small  the  income,  some  saving 
is  usually  possible.  Abstinence  from  alco- 
holic drinks  and  from  useless  or  demoralizing 
amusements  would  furnish  a  margin  for  sav- 
ing in  many  instances  where  such  expenditures 
are  now  made.  There  are  cases,  of  course, 
where  saving  is  not  possible,  and  probably 


30  THE  FALLACY  OF  DANGER 

always  will  be  so  long  as  men  exist,  where 
sickness  or  too  large  families,  or  some  other 
cause,  has  made  it  impossible  to  save  or  even 
to  live  without  government  help  or  charity. 
These  cases  should  be  cared  for  and  pitied. 
But  they  are  the  exception  and  not  the  rule. 
It  is  not  to  be  imagined  that  because  many 
people  of  foreign  birth  do  not  live  so  well, 
according  to  our  standards,  as  a  thrifty  man 
of  American  birth,  therefore  the  foreigner  is 
suffering.  On  the  contrary,  he  may  be  living 
well  according  to  his  standard  and  enjoying 
himself,  and,  what  is  more,  saving  up  money 
for  his  family.  In  thousands  of  instances 
their  savings  enable  them  to  start  a  small 
business,  then  a  larger  and  a  larger,  until 
they  become  wealthy.  Some  of  our  own  home- 
born  young  men  might  well  copy  such  thrift 
instead  of  spending  all  their  income  on  their 
living,  including  often  not  only  food,  clothing, 
and  shelter,  but  liquors  and  useless  and  de- 
moralizing amusements,  whereas  they  might 
save  their  money  and  get  a  start  in  the  world. 
Men  who  have  acquired  wealth  have  paid  the 
price.  Some  improvident  men  are  not  willing 
to  pay  it,  and  yet  want  to  fare  as  well  as  those 
who  have  paid. 


FROM  GREAT  WEALTH  31 

Society  or  government  might  do  much  to 
increase  wealth  and  wages  by  working  with 
natural  economic  laws  and  not  against  them. 
Everything  that  prevents  waste  preserves 
wealth  and  benefits  wages.  Thus,  if  there 
were  no  necessity  for  war  or  army  or  navy, 
all  such  expenditures  saved  and  added  to  the 
wealth  of  the  country  would  be  of  immense 
benefit,  increasing  the  funds  for  wages.  So 
far  as  these  expenditures  are  useless,  the  result 
is  the  same  in  destroying  wealth  or  preventing 
its  increase  as  if  those  engaged  in  such  works 
were  employed  and  paid  for  dumping  sand  into 
the  sea  and  the  product  which  such  works  add 
to  wealth  is  nil.  This  is  not  saying  that  army 
and  navy  are  not  necessary,  in  the  present 
state  of  the  world;  but  it  is  a  pity  they  are. 
We  in  America  are  not  thankful  enough  that 
we  do  not  need  to  waste  so  much  valuable 
time  of  our  young  men  in  the  army  as  they  do 
in  Europe.  There  young  men  are  destroying 
wealth,  while  our  young  men  are  producing  it. 
The  different  effects  on  wages  are  hardly  ap- 
preciated as  they  should  be. 

Think  of  the  war  bonds  in  the  world, 
and  one  begins  to  realize  the  awful  waste  of 
wealth  in  war,  to  say  nothing  of  the  waste  of 


32  THE  FALLACY  OF  DANGER 

life  and  the  failure  to  produce  wealth  on  the 
part  of  those  engaged  in  war.  They  not  only 
do  not  produce,  they  destroy.  Think  of  the 
$1,000,000,000  cost  of  the  Boer  War  to  Great 
Britain,  and  the  big  amounts  to  Russia  and 
Japan  in  their  war, — all  wasted,  if  war  could 
well  have  been  avoided.  Think  what  a  dif- 
ferent result  would  have  been  produced  if, 
instead  of  bonds  for  war,  bonds  had  been 
issued  for  industry;  if,  for  example,  Russia 
could  have  spent  her  money  for  good  roads 
which  she  sadly  needs. 

The  idea  that  government  is  benefiting 
workmen  or  society  by  taxing  the  rich  (thus 
taking  money  directly  from  the  funds  that 
employ  workmen  in  productive  industry),  and 
using  these  taxes  in  paying  officers  and  em- 
ployees of  the  government,  is  utterly  false, 
unless  those  officers  and  employees  perform 
services  which  are  more  important  for  work- 
men and  society  than  is  the  wealth  that 
would  have  been  produced  and  the  wages 
that  would  have  been  paid  if  such  taxes  had 
not  been  collected.  Cutting  off  all  useless 
offices  and  requiring  the  greatest  efficiency  in 
all  necessary  government  officers  and  em- 
ployees are  desirable  for  the   same  reasons. 


FROM  GREAT  WEALTH  33 

Until  money  spent  by  government  will  pro- 
duce as  much  wealth  as  the  same  amount  of 
money  spent  by  individuals  or  corporations, 
the  expenditures  of  government  and  the  taxes 
levied  on  the  people  (rich  or  poor)  should,  in 
the  interest  of  workmen  and  society,  be  kept 
as  low  as  the  necessary  and  really  useful 
functions  of  government  will  permit. 

Natural  law  in  the  economic  world  is  a 
theme  upon  which  a  volume  might  well  be 
written.  When  in  the  natural  evolution  of 
civilization  new  economic  facts  or  conditions 
come  into  prominence,  some  anxious  persons 
become  alarmed,  and  cry  out  "danger,"  and 
advocate  legislation  to  avert  or  remove  the 
danger.  If  such  alarm  and  proposed  legisla- 
tion are  in  accord  with  economic  law,  well 
and  good,  as  for  example  in  the  case  of  efforts 
to  have  sanitary  conditions  of  life  and  work. 
They  are  bound  to  succeed.  But,  if  they  are 
contrary  to  economic  law,  as  in  the  case  of 
attempts  to  fix  by  law  the  rate  of  wages  or 
the  price  of  food  or  the  rate  of  income  on 
capital,  they  are  bound  in  the  long  run  to 
fail.  If  they  succeed  for  a  time,  the  apparent 
success  is  obtained  at  the  expense  of  loss  in 


34  THE  FALLACY  OF  DANGER 

some  other  part  of  the  system  of  industry,  and 
such  loss  is  greater  than  any  gain. 

Attacks  upon  private  property  are  not  new. 
Socialists  and  communists  and  other  advo- 
cates of  different  methods  of  holding  and 
distributing  wealth  have  had  their  little  day 
before  the  present  generation.  The  cele- 
brated Brook  Farm,  for  example,  had  a  col- 
lection of  really  choice  men  and  women, 
many  of  whom  later  became  useful  and 
famous  in  the  world.  But  they  could  not 
endure  the  unnatural  life  of  that  select  com- 
munity. If  socialism  was  not  possible  for 
them,  it  is  much  less  possible  for  the  mixed 
multitude.  One  can  read  of  failure  after 
failure  of  such  communities,  and  there  is  little 
serious  attempt  in  our  day  to  revive  them. 

Present  attacks  are  in  a  different  form. 
Recently  it  has  been  suggested  that  taxes 
ought  to  be  levied  upon  the  rich  for  the  pur- 
pose of  taking  away  their  wealth  or  a  great 
part  of  it.  We  have  also  heard  much  to  the 
effect  that  the  government  must  "control" 
great  wealth.  Great  industries  are  attacked 
in  some  instances  apparently  only  because 
they  are  great.  The  mere  greatness  has 
seemed   to   alarm   some  people.     Instead   of 


FROM  GREAT  WEALTH        '35 

inquiring  whether  there  are  not  natural  eco- 
nomic laws  (without  statute  laws)  to  control 
and  render  harmless,  and  indeed  beneficial, 
such  great  wealth  and  industry,  some  people 
have  rushed  headlong  into  a  crusade  against 
wealth.  The  great  wealth  and  great  indus- 
tries of  the  present  day  in  this  country  and 
others  are  indeed  novelties.  Nothing  ap- 
proaching them  has  ever  before  existed,  so 
far  as  we  know.  Therefore,  over-anxious 
people  attack  them.  But  so  also  the  great 
wages  of  workmen  and  the  great  comfort  and 
happiness  of  all  classes  of  people  are  novelties 
which  have  come  as  a  direct  result  of  the 
great  wealth  saved  and  invested  and  the 
great  industries  of  our  day.  If  the  fearful 
persons  who  are  attacking  great  wealth  and 
great  industries  should  succeed  in  such  at- 
tack, they  would  also  by  the  same  efforts 
have  succeeded  in  reducing  wages  and  the 
comfort  and  happiness  of  workmen  and 
society. 

One  would  like  to  think  that  it  is  wholly 
zeal  for  the  public  welfare  that  prompts 
attacks  upon  great  wealth  and  great  indus- 
tries, and  that  ignorance  of  economic  laws  is 
the  most  blameworthy  fault  of  such  attacks. 


30    FALLACY  OF  DANGER  FROM  WEALTH 

It  is  to  be  suspected,  however,  that  envy  has 
been  the  cause  of  at  least  some  such  attacks. 
Then,  too,  some  demagogues  have  come  along 
who  desired  to  use  what  they  took  to  be 
popular  prejudices  as  a  means  of  getting  into 
office.  Politicians  have  not  been  the  only 
sinners.  Writers  for  magazines  and  news- 
papers, and  the  owners  of  magazines  and 
newspapers  themselves,  have  in  some  in- 
stances made  great  money  gains  out  of  their 
attacks  upon  great  wealth.  The  crusade  has 
been  popular,  and  very  profitable  financially 
to  those  who  have  skilfully  turned  it  into 
money  for  themselves.  "Great  is  Diana  of 
the  Ephesians!" 

In  a  democracy  like  our  own,  education  of 
the  whole  people  in  sound  economic  doctrine 
sometimes  comes  slowly.  We  once  had  a 
greenback  craze  and  a  silver  craze,  and  they 
in  their  turn  passed  away,  and  most  of  their 
advocates  have  been  forgotten.  If  the  cru- 
sade against  great  wealth  and  great  industries 
is  not  in  accord  with  natural  economic  laws, 
such  crusade  also  will  have  an  end,  and  its 
champions,  too,  discredited  and  perhaps  even 
hated  by  the  people,  will  go  into  their  deserved 
oblivion. 


i     FROM    THE    PRESIDENT'S    OFFICE 
TO  ?     ~  —]sr^XT:,T>C!ITY  T.TT5RARY 


.  Hs 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 


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